Federal arrests in a housing deal are unraveling a deeper pattern and exposing how Los Angeles turned homelessness funding into a real estate windfall for Wall Street.
The recent federal arrests tied to a senior housing project have exposed a pattern in a series of earlier transactions quietly approved by the City of Los Angeles. Key to this scheme is the 2022 purchase of four Extended Stay America hotels from Blackstone, the world’s largest private equity firm.
These acquisitions, totaling more than $180 million, were financed through Project Homekey, California’s pandemic-era program intended to convert hotels into homeless housing. But analysis shows the City was not addressing homelessness.
Instead, it created a real estate windfall for politically connected developers and one of Wall Street’s most powerful landlords.
SEE: CA Non-Profit Reportedly Linked to Massive Housing Fraud Scheme
The City Did It First
Documents from the Housing Authority of the City of Los Angeles (HACLA) show that in January 2022, city officials approved the purchase of four Extended Stay America properties for staggering amounts far above market value:
|
Property |
Bldg. Size |
Lot Size |
Units |
Sale Price |
Cost/Unit |
|
Extended Stay America L.A. Airport |
58,460 SF |
79,802 SF |
133 |
$52,535,000 |
$395,000 |
|
Extended Stay America South L.A. |
50,937 SF |
58,352 SF |
136 |
$37,808,000 |
$278,000 |
|
Extended Stay America Woodland Hills |
55,249 SF |
119,661 SF |
146 |
$46,866,000 |
$321,000 |
|
Extended Stay America Northridge |
53,608 SF |
72,776 SF |
117 |
$46,791,000 |
$399,923 |
|
Totals: |
|
|
532 |
$184,000,000 |
$345,865 |
Each property was bought from Blackstone, which had acquired the Extended Stay America brand in 2021 through a $6 billion joint venture with Starwood Capital. Less than a year later, Blackstone was cashing out of its Los Angeles holdings. Not to private investors, but to City Hall, flush with emergency homelessness funds.
According to HACLA records, each purchase included “architectural fees,” “zoning,” “CEQA reviews,” “environmental assessments,” and a 2 percent administrative fee, all billed to taxpayers and totaling more than $4.2 million in added costs.
Three years later, most of these hotels remain largely empty. They are part of a growing portfolio of Homekey-funded properties that have failed to house significant numbers of homeless residents despite costing taxpayers billions.
The Playbook Almost Repeats Itself
Sound familiar? Because it is. Back in August, I reported how Torrance officials stopped Los Angeles County from spending $30 million on a hotel valued at only $10 million, a near copy of the scheme the City of Los Angeles ran three years earlier.
READ MORE: Red Alert in Deep Blue California: Torrance Republicans Halt Liberal LA County Power Grab
The steps were nearly identical. Find a hotel. Inflate its value. Declare an “emergency” purchase using homelessness funds. Move taxpayer money quickly before anyone asks questions.
The County had entered into a contract with Blackstone to purchase an Extended Stay America hotel in Torrance for $30 million. The property sits on a 74,662-square-foot lot with 51,774 square feet of building space, closely mirroring the four hotels the City of Los Angeles acquired just three years earlier.
Suspecting the County’s price was inflated, the City of Torrance commissioned an independent third-party appraisal, which confirmed the true value was far lower. Under public scrutiny, the deal collapsed, with the Republican-led city government preventing another multi-million-dollar misuse of public funds. Their act of due diligence saved taxpayers millions and prompted this writer to investigate whether a broader pattern of manipulation has been at play for years.
Spoiler alert. There is!
A System Built on Secrecy
This problem goes beyond corruption. It is a system built for secrecy. Project Homekey was designed for speed, not scrutiny. Cities are allowed to bypass competitive bidding and public hearings if they label their purchases “emergency acquisitions.”
That loophole creates a perfect environment for inflated valuations, insider deals, and bureaucratic self-dealing. HACLA, acting as both broker and administrator, handles all transactions internally and then bills the City for “staffing and overhead.”
In effect, Los Angeles pays itself with taxpayer dollars to buy overpriced hotels from Wall Street.
The Dominoes Start Falling
The senior housing scandal looks like the first domino to fall. Federal arrests in that case revealed how developers, consultants, and housing officials colluded in inflating costs and moving public money through shell organizations.
Mayor Bass, under growing pressure, has promised “zero tolerance for homeless funding fraud.” But that vow rings hollow when the City itself wrote the blueprint for the very fraud it now condemns.
The Extended Stay America purchases were approved under Eric Garcetti, but Bass inherited both the properties and the problem. Despite repeated warnings, the city continues to defend its use of Project Homekey funds while thousands of units remain vacant and costs continue to climb.
Blackstone’s Perfect Exit
The biggest winner in this entire operation is Blackstone.
The trillion-dollar investment firm, known for buying up housing stock nationwide, framed its 2021 Extended Stay America acquisition as a strategic, long-term investment in the hospitality sector, betting on a post-pandemic recovery in hotel occupancy and revenues. The company emphasized growth, operational improvements, and portfolio optimization as part of the investment thesis.
In Los Angeles, however, these sales effectively became a short-term, taxpayer-funded liquidation of aging assets at inflated prices, diverging from Blackstone’s “long-term investment” narrative.
By selling to the City at inflated prices, Blackstone offloaded aging assets for top dollar and walked away with millions in profit. Meanwhile, Los Angeles inherited hundreds of hotel rooms that still are not being used as permanent housing.
The Real Cost
The City of Los Angeles now owns four half-empty hotels that cost more than $180 million while homelessness continues to run rampant. Worse, over 1,000 Homekey-funded units remain unoccupied, while hundreds more are tied up in legal and permitting issues.
Every wasted dollar is one that could have gone toward mental health treatment, addiction recovery, job training, or new housing construction. Instead, those dollars flowed to brokers, bureaucrats, and Blackstone’s balance sheet.
When Torrance city leaders rejected the County’s $30 million Extended Stay proposal, critics accused them of being anti-homeless. In reality, they were anti-corruption, protecting taxpayers from another multimillion-dollar transfer of public wealth to private hands.
That single act of independence, combined with the latest housing scandal, may have uncovered a pattern implicating multiple agencies across California – if investigators continue pulling the thread (Hint, hint. Nudge, nudge. 😉).
Editor’s Note: The Schumer Shutdown is here. Rather than put the American people first, Chuck Schumer and the radical Democrats forced a government shutdown for healthcare for illegals. They own this.
Help us continue to report the truth about the Schumer Shutdown. Use promo code POTUS47 to get 74% off your VIP membership.
